Europe watches for Italy’s next move

The president of the European Union's executive is calling on eurozone leaders to consider further changes to the region's bailout fund, including increasing its size.

In a letter to leaders, European Commission President Jose Manuel Barroso urged ``a rapid re-assessment of all elements related to'' the eurozone's bailout fund to make sure it can effectively stop the debt crisis from spreading to big countries like Italy and Spain.

Prime Minister Silvio Berlusconi pledged on Wednesday to step up economic reforms as he called for a broad-based effort to fight the market turmoil which has threatened to drag Italy into a Greek-style financial crisis.

Market concern has risen sharply since early July as attention focused on splits in Berlusconi's centre-right government and on discord between Berlusconi and Economy
Minister Giulio Tremonti, seen as an anchor of stability.

James Walston, professor of international relations at The American University of Rome, comments that essentially Italy’s banking system and economy is sound however its prolonged political instability coupled with decades of stagnant growth are compounding market concerns: Listen: